US Treasury Secretary Scott Bessent stated that the United States is negotiating a $20 billion currency swap facility with Argentina and is prepared to purchase the country's dollar-denominated bonds. This move would provide a "bridge" for Argentine President Javier Milei to sustain his administration until next month's crucial midterm elections.

This initiative demonstrates President Donald Trump's urgency to help his libertarian ally resist a peso run crisis. The two leaders and their teams met during the UN General Assembly in New York on Tuesday, with Milei immediately expressing gratitude for Trump's "firm support" on Wednesday.

In a post on X platform (formerly Twitter), Bessent stated: "The Treasury Department is currently negotiating with Argentine officials to establish a $20 billion currency swap facility with Argentina's central bank. We are working closely with the Argentine government to prevent excessive exchange rate volatility."

In recent weeks, Milei's poor performance in Argentina's provincial elections has led to market turmoil. However, since Monday when the US signaled support, market expectations for American assistance have heated up, with Argentine markets rebounding significantly this week: the peso has risen 2.4%, and dollar bond prices across all maturities have increased. The more liquid 2035 maturity bonds have gained approximately 4 cents, erasing losses since the Buenos Aires provincial elections.

"This eliminates uncertainty related to liquidity difficulties that the economic plan has generated so far," said Federico Filippini, chief economist at Adcap Financial Group. "The Treasury's willingness to directly purchase sovereign debt significantly increases the possibility of a decline in country risk premiums and could even enable the government to issue debt in early 2026."

During a Fox News interview Wednesday morning, Bessent called this assistance a "bridge to the election" — referring to Argentina's October 26 midterm elections. In these elections, Milei hopes to expand his party's seats in Congress, as lawmakers have recently been pushing to override his vetoes on spending bills.

Bessent stated: "I don't think the market has lost confidence in him. I think the market is looking backward — looking at Argentina's poor economic management history over nearly a century."

An Argentine official believes US support provides Milei with an opportunity to adjust exchange rate policy, helping Argentina's central bank rebuild depleted foreign exchange reserves. As part of Argentina's latest agreement with the International Monetary Fund (IMF), the country has set a peso trading band since April. Last week, Argentine monetary authorities consumed over $1 billion in foreign exchange reserves to maintain the peso within this band.

"This helps correct market expectations," said Daniel Marx, former Argentine Finance Minister and current director at Quantum Finanzas. "The most ideal approach now is to move as quickly as possible toward a more open, market-based foreign exchange mechanism."

President Donald Trump expressed support for Argentine leader Milei but did not reveal specific details about providing financial assistance to the South American country's government. On Tuesday, sitting alongside Milei during the UN General Assembly, Trump stated: "We will help them, and I think they don't need a bailout."

This marks the second significant financial assistance Trump's administration has provided to Argentina, as his government plays a more prominent role in Latin American politics. During Trump's first term in 2018, he pushed the IMF to approve an initially $50 billion rescue package for then-Argentine President Mauricio Macri, though this plan quickly collapsed.

Subsequently, the IMF reached two more agreements with Argentina, including a $20 billion assistance package that Milei secured this year.

Now in his second term, Trump has intensified tensions with Brazilian President Lula, threatened new tariffs against Mexican President Claudia Sheinbaum, and ordered strikes against ships allegedly involved with drug trafficking groups in the Caribbean as a warning to Venezuelan President Nicolas Maduro. During this period, Milei has made multiple visits to the US and publicly praised Trump.

Even before Bessent detailed the financial support plan on Wednesday, US economists had criticized the government's support for Milei's economic policies — Argentina has repeatedly failed to fully comply with IMF programs and has experienced three sovereign debt defaults since 2001.

"The US must be wary of repeating the IMF's mistakes," said Brad Setser, senior fellow at the Council on Foreign Relations and former Obama administration Treasury official, before Bessent announced the plan. "The whole world understands that lending money to Argentina is easy, but getting it back is difficult."

Milei calls himself a free market advocate, but to support the peso and prevent annual inflation from soaring again before midterm elections, he has increasingly intervened in the stagnant economy. Argentina's inflation rate has dropped from 289% last year to 34%, and Milei needs strong electoral performance to consolidate his tenuous minority position in Congress — opposition lawmakers continue to resist his pro-market agenda and economic reforms.

Against the backdrop of Milei's increased intervention, Argentina's economic activity has declined in recent months. Analysts predict that following last quarter's slight contraction, Argentina's third-quarter gross domestic product (GDP) will continue to shrink. Unemployment remains high, particularly during Milei's tenure, as weak consumer spending has left construction, manufacturing, and retail sectors struggling.

The swap facility proposed by the Trump administration may raise concerns from China — the facility's scale exceeds Argentina's existing approximately $18 billion swap facility with China's central bank. Beyond the swap facility, Bessent also stated that the US is prepared to provide standby credit through the Treasury's Exchange Stabilization Fund (ESF). It remains unclear whether both the swap facility and standby credit will come from this fund.